Soybean prices get fidgety

Coming off his group’s annual meeting in January, Charles Hall, CEO of the North Carolina Soybean Producers Association, says prices struggled a bit last year before climbing back into the mid-$12 range. Of course, he well remembers plenty of market quotes in 2005 and 2006 when those prices were in the mid-$6 range. It is all relative, right?

Nov 28, 2012

Soybean prices get fidgety

By RICHARD DAVIS

Coming off his group’s annual meeting in January, Charles Hall, CEO of the North Carolina Soybean Producers Association, says prices struggled a bit last year before climbing back into the mid-$12 range. Of course, he well remembers plenty of market quotes in 2005 and 2006 when those prices were in the mid-$6 range. It is all relative, right?

“I understand demand has been somewhat soft at the crushers,” Hall says of recent price moves. “I don’t know where it is going in 2012 — that probably depends on livestock and the placement of live animals onto farms for production in 2012. I also understand there has been some softness in demand for soybean meal over the last several months, bringing us to the place we are now.

Key Points

• Soybean prices seem to have stabilized at a new level.

• At the same time, demand is soft in a number of soybean price sectors.

• China will buy over half of the world’s exports for the second year in a row.

“The China demand for imported beef from the U.S. is still strong, but may not be appreciating quite as quickly as it once was — as it was over the last few years,” he adds. “There is certainly a growing demand in China, but maybe that demand is not growing quite as fast as it grew in previous years. That may add a little bit of softness back into it.”

Still, the bottom line relies on a factor that has always been critical — and unpredictable — for farmers. “Everything else being equal,” Hall says, “I think if we have a good weather year, it will probably be another good year for soybean farmers.”

Navigating the markets

John Baize, president of Baize & Associates in Falls Church, Va., sees ups and downs in the current situation. Baize & Associates is an international agricultural trade and policy consulting firm specializing in the oilseeds sector.

“In the last two years in the U.S., we’ve had very good exports of soybeans, and the year before, very good exports of soybean meal and soybean oil,” Baize says. “The year we are in now, well, it looks terrible.”

Soybean exports are down sharply, and meal and oil exports are down, he says, adding “but it is explainable when you figure what happened. Brazil had about 7 million more tons of soybeans on hand on Sept. 1, 2011, than they did the previous year.

They just had a big crop — and they had the stocks there. Toward the end of the summer last year, everybody got worried that we were not going to have a good crop, that we were going to have a drought that was really going to hit the Midwest and the Southeast. Of course, Brazil kept selling those soybeans heavily during the summer, particularly to people in Europe and China who were worried about our crop.

So they had those 7 million tons that were mostly sold on Sept. 1. When we came into harvest, we came out with a crop that was down, but that was still a pretty darn good crop. But the demand that we would normally get in the fall period was gone, because the buyers had already bought Brazilian beans that were in stock. That is why our exports are down to this point.”

The tables are turned

The reason soybean producers in the Carolina-Virginia region ended up with a decent soybean crop was the same reason so many farmers suffered big financial losses this year. It looked as if our soybean growers would have a terrible year during the early part of the season; then Hurricane Irene brought the rain soybean growers so desperately needed, and turned a bad crop year into a decent crop year. That same storm devastated many growers’ year with other crops.

Today, Baize says, U.S. growers have a lot of soybeans in stock, particularly in the Carolina-Virginia region, and it looks like drought is going to cut into Brazilian stocks. “So people are beginning to get worried about whether or not there will be adequate supply later this summer,” he says. “That is one reason we are beginning to see some pickup in U.S. sales.

Now if that drought does indeed cut their [Brazil’s] production by 10 million or 11 million tons, like some people think, then we are going to be in much better position to export soybeans the rest of the marketing year.”

One wild card may be Argentina. That country has a very small domestic market for soybean meal, and, if need be, will price its soybean exports aggressively. This makes it tough for the U.S. to expand soybean-meal exports in particular.

Of course, Chinese import decisions could quickly change everything. Last year China imported more soybeans than the rest of the world combined, and Baize says it will repeat that performance this year.

HALL’S PERSPECTIVE: Charles Hall, CEO of the North Carolina Soybean Producers Association, notes that soybean meal demand has been soft for several months, and soybean demand has been soft at the crushers. However, prices recently climbed back to the mid-$12 range.

This article published in the March, 2012 edition of CAROLINA-VIRGINIA FARMER.